ACIS Administration Amendment (Unearned Credit Liability) Bill 2007

Bills Digest no. 92 2006–07

ACIS Administration Amendment (Unearned Credit
Liability) Bill 2007

WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.

To confirm the circumstances under which the
Commonwealth can issue an Unearned Credit liability (UCL) to
include cases where the registered Automotive Competitiveness and
Investment Scheme (ACIS) participant has received credits to which
it is not entitled.

As part of Australia s commitment to trade liberalisation,
tariffs on automotive imports were reduced from 15 to 10 per cent
in 2005, and will further reduce to five per cent in 2010. To
assist the Australian automotive industry with these tariff
reductions, in 1998 the government announced a transitional
assistance package, the Automotive Competitiveness and Investment
Scheme (ACIS). Stage 1 of the ACIS, from 2001 to 2005, comprised
$2.8 billion in transitional assistance directed towards
encouraging new investment and innovation in the Australian
automotive industry. In December 2002 the government announced
stages 2 and 3 of the ACIS, costing $4.2 billion, running from 1
January 2006 to the end of 2015. The government has stated that all
industry-specific support will cease on 31 December 2015.
(1)

The benefits under ACIS are in the form of import duty credits
that can be used to offset customs duty on eligible imports.
These credits can also be sold or transferred. Claims are
lodged quarterly by ACIS participants, and these are paid by
AusIndustry, with a subsequent rigorous audit process employed to
verify their validity.(2)

Where the audit process identifies credits that have been issued
in relation to ineligible claims, the Commonwealth recovers credits
via the issue of an Unearned Credit liability (UCL). AusIndustry
provides the following definition:

An UCL is a credit that should not have been
issued under ACIS for the following reasons:

an error in calculating duty credit or a mistake of fact

incorrect or incomplete information provided to
AusIndustry

a clerical error or mistake in the ledger

a transaction where the parties are not at arm s length,
or

a person is found to not be entitled to the duty credit as the
result of audit or compliance processes.

If it is determined that a customer has an
unearned credit liability they will be liable to have the excess
credits removed from their ACIS ledger account or repay the cash
equivalent to the Commonwealth.(3)

A recent AAT decision, Spicer
Axle Structural Components Australia Pty Ltd and Secretary,
Department of Industry, Tourism and Resources (November
2006), called into question the existing system of recovering
credits when they are found to have been issued incorrectly. The
AAT found that while AusIndustry was administering the ACIS as a
self-assessment scheme, the ACIS Administration Act 1999
did not specifically impose a self-assessment regime. In relation
to the credits claimed by Spicer Axle for their investment in
equipment, the AAT found that, as they were not specifically
covered by Sections 94 or 95 of the Act, AusIndustry did not have
the power to issue an UCL for those credits.(4)

The implication of the AAT decision was that AusIndustry may be
compelled to audit claims for duty credits when they were lodged
(ie prior to payment), rather than the current practice of
self-assessment by industry and then audit of claims after
payment.(5)

According to the Minister, the up-front assessment of all claims
would result in lengthy delays in the issuing of duty credits
imposing significant financial hardship on members of the
automotive industry.(6)

In response to the AAT decision, this bill makes amendments to
the ACIS Administration Act in order to clarify the circumstances
in which an UCL may be issued.

There has been no comment specifically on the bill. With
declining sales of domestically manufactured cars, GM Holden, Ford,
Mitsubishi and Toyota are reportedly lobbying the government for a
freeze in tariff reductions beyond 2010 and an increase in the ACIS
scheme.(7)

Schedule 1 to the bill makes amendments to the ACIS
Administration Act (the Act).

Item 1 adds one more circumstance to the list of cases in which
a claimant is not entitled to a duty credit. New Section 94
(1A) provides that a claimant who has or had a duty credit
is not entitled to the credit if the credit was issued in respect
of an investment that was not an eligible investment . Eligible
investments are defined in the Section 6 of the Act.

Item 2 repeals Section 95 of the Act and replaces it with a
new Section 95 which provides automatic liability
on the pact of ACIS participants if they receive duty credits to
which they were not entitled under Section 94 of the Act, or any
other reason.(8) The previous Section 95 gave the
Secretary of the Department of Industry, Tourism and Resources the
discretion to determine whether an ACIS participant had incurred a
credit liability as a result of a breach of Section 94 of the
Act.

Item 3 amends Section 114 of the Act, which deals with AAT
appeal provisions. Existing Subsections 114 (j) and (k) are no
longer needed as the Secretary s discretion under existing section
95 is being removed (see above). Item 3 inserts new
Subsection 114 (j), which ensures that the AAT may review
a decision to issue a notice for an Unearned Credit liability.

Item 4 applies the amendments retrospectively, from the
beginning of Stage 2 of the ACIS (1 January 2006).

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